President Obama suffered a political defeat by the progressives from his own party when Congress failed to secure the fast track authority that he needs to pass the Trans-Pacific Partnership (TPP) Agreement. Many opposing Democrats believed the ongoing negotiating agreement would damage the middle class American workers.

While there is the long standing aversion to trade agreements by labor and unions, the current driving opposition to the President's trade agreement also stems from President's long distance relationship with Congress. Instead of personally devoting to listen to his own party congressional members, the President "delegated most of the arm-twisting to his unpopular trade representative, Michael Froman." (The New York Times 6/13/2015) President Obama's style of distancing himself with Congressional Democrats might be backfiring, especially at a crucial time when he needs solid congressional support.

While the Office of the President is occupied with Executive duties, nevertheless the President needs to reach out to Americans from time to time and have an honest two-way conversation and not merely give speeches. Congress especially has the greater need to listen to their constituencies and act according to the will of the district. Some people have voiced concerns regarding the TPP Agreement, and while Congress has listened, the President merely has focused on lecturing.

The TPP agreement has benefits as well as costs to the American economy, and people should wait until the final details are decided upon to voice their opinions. However, President Obama's armchair lecturing on how Congress ought to vote without acknowledging the public anxiety on the ongoing negotiation might backfire, regardless of the merit of the agreement.

It is puzzling that a President who is praised with his communication skills is criticized for being out of touch with the anxious public in this crucial time of his Presidency.

As international trade broadens, foreign currency exchanges play a greater role in the world economy. It is necessary to have exchange rates at fair market value in order for transaction costs of international trade to become more efficient.

For the past several weeks, Congress has been debating to include a provision in the Trans-Pacific Partnership agreement (TPP) that will allow the US to retaliate against China’s seemingly ongoing currency manipulation (Syracus.com 5/6/2015). While the TPP does not explicitly center on China, some in Congress wanted to use this trade agreement in a more aggressive means to keep China’s trade influence in check. Already, by excluding China from this grand trade agreement, the US wants to increase its economic influence in the Pacific region against the rising China’s global influence.

The US should continue keep a check on China’s rising influence, whether it be on trade or military might. However, on the issue of currency manipulation, US lawmakers ought to focus on a different set of actors, especially given that the IMF is planning to announce that the Chinese currency is just about fairly valued (Wall Street Journal 5/3/2015).

The LA Times reported recently that the Justice Department has announced a $5.7 billion settlement against Citi, Chase, Barclays, Royal Bank of Scotland Plc, and UBS AG (5/20/2015). The banks are accused of colluding to manipulate the foreign exchange market. Given that roughly $5 trillion is exchanged in the foreign currency market, there should be a public outcry on the meager $5.7 billion total settlement that is split among the five banks.

China has a history of depreciating its currency to gain advantages over the export markets, and US politicians rightly have called national attention on this issue. The recent settlement ought to be brought to public scrutiny, given the propensity of the crime and the disappointing settlement that favors the banks. While the Justice Department announced the settlement in a celebratory manner, the lackluster penalties imposed by the bank brings up the question to why the Justice Department did not push harder.

In the LA Times article, it is noted as the following: “‘I think it's a facade of justice,’ said Jimmy Gurulé, a University of Notre Dame law professor and former federal prosecutor and Treasury Department official. ‘It's an attempt to make it appear that the Department of Justice is really doing something serious about the culture of corruption in banks. But the actual perpetrators, the architects of the criminal scheme, are not held accountable.’”

Hopefully, someone in Congress can call attention on not only the issue of some banks being currency manipulators but also the Justice Department for setting a low bar of calling it a settlement successful.

The debate on the progress of debating and voting on the Trans-Pacific Partnership agreement (TPP) shows a clear vulnerability of President Obama’s opponents. Several Democrats, including Senator Elizabeth Warren, voiced opposition by stating that the TPP would cost American jobs. (New York Times 5/9/2015)

It is absolutely true that any trade agreement that would decrease trade barriers could cost American manufacturing jobs, but that is one in a small part of the overall effects of any trade agreements in the first place.

The TPP is not merely economical but also political. Just like NAFTA, this agreement is an attempt by the US to create a free flowing economic zone to “counter” against a rising economic power. For NAFTA, the rising economic power was the European Union, and rising economic today is China (and India). Whether the upcoming transnational trade agreement would position the US at a long term geopolitical-economical advantage is still under debate.

Nevertheless, the TPP is also a trade agreement, and the main debate on the President’s fast track authority rests on the TPP’s impact on American jobs. The problem of focusing on the secrecy on the TPP negotiations and the TPP’s potential economic impact is that the agreement has not been fully hammered out by member nations. In fact, without providing a clear, smooth, and fast political means to accept or reject this proposal by all member states, there is no point in negotiating the fine details of the agreement, because the high cost of trade negotiations is not worth for any member states, given the current high uncertainty of the TPP’s future. If Congress does not give the President fast track authority, then TPP effectively is dead.

But if the debate focuses on protecting American jobs here in the actual territories of the USA, then the serious solution by Senator Warren and her supporters ought to focus on increasing trade barriers. One of the popular ways to criticize the TPP has been pointing out how NAFTA was a bad agreement for the average American workers due to American companies shipping most of their manufacturing capabilities abroad. Interestingly, most manufactured goods the average American sees in today's market is actually from China, which is not a member of NAFTA, but clearly there is a perception that a lot of our problems with the manufacturing jobs was caused by NAFTA.

Thus, the only logical solution for Senator Warren ought to focus not only on defeating the TPP but also withdrawing the US from pre existing trade agreements, and have the US enter into an age of trade isolationism. This would inevitably increase prices for almost everything for the American consumer, and economic growth would be severely impacted. But if trade agreements are causing the loss of American manufacturing jobs, then shouldn’t we simply increase trade barriers?

Of course, this is a straw man argument, but even a fair assessment on Senator Warren's position actually weakens her position even more. Defeating the TPP but supporting the status quo on trade agreements (as in, let the US keep the existing trade agreements but stay out of new ones) while criticizing those previous trade agreements implies that manufacturing jobs cannot be brought back from trade agreements. Then, somehow, supporting hypothetical trade agreements in which the US gets to protect its manufacturing jobs while allowing US companies to access untapped markets might be the next proposed step for Senator Warren and her supporters. Such hypothetical trade agreements could be achieved by tough trade negotiations and allow manufacturing jobs to stay home while selectively decreasing trade barriers to improve the US economy. Unfortunately, the competing interests in the global trade market guarantees that such hypothetical, grand trade agreement would never come to fruition as other countries are guaranteed to protect their own domestic markets. What does that leaves with us?

Ultimately, what Senator Warren and her supporters want is a seat at the negotiating table, where they can make sure that American manufacturing jobs and other domestic interests are protected from the trade agreement. The problem is that this will never happen. Trade agreements are time consuming to formulate, and there is no possibility that other countries would allow a US Senator a seat at the negotiating table. In the end, Senator Warren is trying to get direct influence of the TPP that she never will get, so she is attacking this unfinished agreement from outside the negotiating table to try to indirectly influence the TPP negotiations.

Perhaps, proposing increasing trade barriers under the banner of populism might be more effective than continuing her direct attack on the TPP.

Given that the economy is one of the big issues in the campaign, it is surprising that most candidates shy away from discussing the Trans-Pacific Partnership agreement (TPP). The TPP is a proposed regional free trade agreement (FTA) that “aims to liberalize trade in nearly all goods and services and include rules-based commitments beyond those currently established in the World Trade Organization.” (The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress 3/20/2015) Given the large scope and the large number of participants, the economic and legal implications are quite high.

The immediate impact of the TPP, if passed by all member nations, would be a reduction of trade barriers and standardization of several rules and practices, including areas of intellectual property rights, access to advanced medicine, and even labor rights. In theory, this would open up large markets for US companies to sell goods and services at lower transaction costs, which would create more job opportunities within the US. Whether this proposed FTA would actually facilitate job growth in the US in the short term is up for debate, given the US labor participation rate is relatively low (Bureau of Labor Statistics -  Accessed 4/30/2015).

The campaign debate on the TPP is likely to be isolated within the Democratic Party, given the party’s strong support from traditional labor unions. Nevertheless, the public debate on the TPP, if there ever will be one, would be difficult given the complexity and broad scope that this FTA is attempting to achieve. Even the concise and informative report on the TTP “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress” is a dense 56 page report that is unlikely be read by an average citizen. At best, the TPP debate would be comprised of nitpicking several dispersed points throughout the agreement.

The TTP will probably be the legislation that might have a greater economic impact than the Affordable Health Care Act in the long term, yet the public discourse on the agreement has disappointingly been lagging. Elected leaders from all parties need to review this FTA closely once introduced and determine via public dialog whether the TTP serves the greater American interest. Because neither “new tax policy” nor “reforming Obama Care” would even have the closest economic impact than the TTP will ever have.

If we are going to have a real discussion on economy, it ought to include the TTP.

Further Readings

The Trans-Pacific partnership and Asia-Pacific integration: a quantitative assessment – It is a very good academic paper that looks at potential difficulties of the TTP negotiation. Also, the paper believes the annual economic welfare of having (only) the TTP in the region would be $104 billion by 2025.

After former Senator and former Secretary of State Hillary Clinton announced her candidacy for the President of the United States, the Republican presidential candidates seem to focus her (The New York Times 4/18/2015).

Given that it is still early in the Presidential campaign and Mrs. Clinton being the current front runner in the Democratic ticket, it is a wise decision for the Republicans to temporarily unite against Mrs. Clinton than fight each other.

But on a serious note, at the time of this writing, there has not been substantive debate or even detailed proposals on policy offered by any presidential candidates so far. Checking all of the presidential candidates’ websites, there are only snippets of policy positions on specific issues that the campaign finds important. Granted, it is still early in the campaign season, and I am sure that those detailed broad policy position papers are being prepared as the campaigns develop.

Reading the current candidates’ position on jobs and the economy (if they have any yet) bring disappointment. According to the Federal Reserve’s latest minutes, the economy is in a mixed recovery, with certain areas (e.g. GDP growth, labor market conditions) performing well while other economic measurements seems to see a deceleration (e.g. Real personal consumption expenditures). If anybody would like to get a real detailed, non-partisan report on the current state of the economy, then the Federal Reserve’s minutes provide a clear picture. The report also shows the complexity of the US economy, including how different measures of the economy, while providing contradictory trajectories, represent the complicated interlocking components working together to move ahead on a slow economic recovery (The Federal Reserve 3/17/2015).

After skimming the Federal Reserve minutes, the small snippets on how the candidates will improve the economy look childish. So far, none of the presidential candidates have written any policy positions in regards to improving the US economy given the global market’s impact in our economy.

Does anybody remember the phrase “End America’s dependency on foreign oil”? Where did that phrase go? It disappeared because the overly simplistic political discourse on the American economy did not anticipate that oil prices could go as low today. The reasoning to the decline of the price of oil is still being debated (Saudi Arabia defending market share vs. Saudi Arabia trying to eliminate competition by artificially lowering gas prices vs. glut in the oil inventory in the oil market vs. other reasons), but that debate is more substantive than the overly simplistic political discourse of “America’s dependency on foreign oil”. At the end of the day, the price of gas in the pump is low in America due to the impact of the international oil markets abroad.

Our American economy influences and is influenced by the global economy, and any sensible policy positions on the US economy ought to include some fact on how this country will move forward with trade agreements, tariffs, multilateral cooperation on global market stability, and other components that deals with international trade. It is a bit early in the campaign to demand detail policy statements from the candidates, but I hope the candidates would go beyond the simplistic political snippets and offer a more comprehensive proposal for not only the US economy but on other issues.

 

Candidates' position on the Economy (that is available on 4/20/2015). Please note that people who have filed as a candidate with the Federal Election Commission and had a policy position on the economy posted on their own website are listed.

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